By: African Mining

South Africa’s mining input costs accelerated sharply in May, pushed higher by rising global energy prices linked to Middle East tensions. The Minerals Council’s MCI Cost Index increased to 5.3% year-on-year (y-o-y) from a revised 2.8% in April.

The 2.5% increase was driven primarily by higher prices for coke and refined petroleum products, and chemicals. Cost pressures are likely to remain elevated on a year-on-year basis in June. While Brent crude prices fell following the ceasefire reached in the third week of the month, oil prices remained above pre-conflict levels for much of June. Consequently, energy-related inputs are expected to continue exerting upward pressure on annual mining input cost inflation, even though month-on-month fuel prices have begun to ease. 

Looking ahead, further cost increases are expected as winter electricity tariffs take effect from mid-June, typically raising electricity costs by 20–30% through September, while municipal water tariffs are set to increase in July. Together, these developments point to a period of rising input cost pressures for the mining sector in the months ahead. Below, we present trends in input costs, both including and excluding labour, together with the Producer Price Index for final manufactured goods, which reflects the average net selling price in the manufacturing sector.

On a month-on-month (m-o-m) basis, almost all cost baskets comprising the MCI Cost Index recorded increases in May. The most significant contributor was coke and refined petroleum products, which rose by 15.3% m-o-m, reflecting the sharp increase in global energy prices during the month. This was followed by chemicals and man-made fibres, which increased by 11.5% m-o-m. Broad-based price increases across the remaining categories also contributed to the acceleration in mining input cost inflation, resulting in the MCI Cost Index rising by 2.3% compared with April.

The only category to record an improvement was imported intermediate goods, which declined by 0.4% m-o-m. This reflected an improvement in the nominal effective exchange rate (NEER), supported by a stronger rand against a basket of currencies of our major trading partners. In May, the rand appreciated by 0.5% against the US dollar relative to April, while also strengthening against the euro (0.7%), pound sterling (0.2%), Japanese yen (0.3%) and Chinese yuan (0.6%). This helped to partially offset broader cost pressures stemming from imports.

Coke and refined petroleum products rose by 40.3% y-o-y, largely reflecting the 62.0% increase in Brent crude oil prices, which averaged USD103.8 per barrel in May 2026 compared with USD64.1 per barrel a year earlier. Higher oil prices also drove increases across the chemical value chain, with other chemicals and man-made fibres rising by 19.8% y-o-y. Key chemical inputs such as ammonia, ethylene and propylene all recorded substantial annual price increases, underscoring the broad transmission of energy price shocks through industrial supply chains.

The impact of the energy shock stemming from the conflict in the Middle East was not uniform across mining commodities, with cost pressures largely reflecting each subsector’s exposure to fuel, energy and transport inputs. Other mining and quarrying, which includes aggregates and sand, recorded the highest input cost inflation at 6.3% y-o-y, reflecting its heavy reliance on diesel-powered operations and road-based transport. Similarly, coal, chrome and manganese producers faced disproportionate cost increases due to their significant transport and storage requirements, much of which remains road-based and therefore highly exposed to higher fuel prices.

Gold mining input costs also remained elevated. The energy-intensive nature of deep-level gold mining, combined with annual electricity tariff increases and broad-based increases across key input categories, continued to place upward pressure on operating costs. 

The May data show that the energy shock triggered by the conflict in the Middle East has transmitted more forcefully through the mining input cost chain. Cost pressures increased across almost all categories, with the largest annual impacts concentrated in fuel, energy, chemicals, and transport-related inputs. These were the areas most directly affected by heightened concerns over oil supply disruptions through the Strait of Hormuz, a critical global shipping route through which around one-fifth of the world’s oil trade passes.